Teaching Economics, Big-Bank Style

The New York Times, citing results from the National Assessment of Educational Progress (publicized as “The Nation’s Report Card”), reports that “42 percent of high school seniors were deemed proficient in the 2006 economics test, a larger proportion than in any other subject over the last decade.” In this era of economic crisis, it would be easy to read this as good news. But doing so would be a big mistake.

Our schools have been snookered into delivering a K-12 economics curriculum designed and paid for by big the banks. JPMorgan Chase, Goldman Sachs, Bank of America, HSBC, and Wells Fargo fund the Council for Economic Education (CEE). CEE, the leader in K-12 economics education, advances an economics agenda indistinguishable from that of Fox News.

Banker compensation is now at stratospheric levels. According to Reuters, Wall Street financiers received $20.8 billion in bonuses last year on top of pay packets so ginormous they’re almost impossible to fathom. Check this out:

Compensation (pay, benefits, bonuses)

Bank of America          $35.1 billion

Wells Fargo                  $26.1 billion

JPMorgan Chase          $25.4 billion

Citigroup                      $22.6 billion

Goldman Sachs            $17.5 billion

Morgan Stanley            $16.0 billion

Total                            $142.7 billion

This money is too good to let anything get in the way. Think of it like this: the aggregate compensation of Wall Street’s big boys dwarfs the gross state product of 20 of the 50 states. Their booty is the equivalent of 5 Vermonts, or 3 Maines, or 2 New Mexicos, or all of Kansas.  Wrap your mind around that: the total output of Kansas, population 2.9 million, equals executive pay at 6 banks! The mind boggles.

So how startling is it to discover that they dump buckets of money lobbying Congress? Last year the American Bankers Association shelled out just over $3 million, Citigroup spent $5.8 million, JPMorgan spent $7.4 million, Wells Fargo spent $5.4 million, Bank of America spent $3.8 million, and Goldman Sachs doled out $4.6 million. When E.F. Hutton (Citigroup) talks, Congress listens.

One need not be a conspiracy theorist to see a pro-bank agenda wrapped up in a bank-funded economics curriculum.

The financial services industry lobbies for less regulation and less oversight, justified of course by appeal to the neoliberal mantra, “markets always and everywhere work best when left alone.” From kindergarten through twelfth grade, students are carefully tutored in the free market creed.


The Market Song

(Tune: “My Bonnie Lies Over the Ocean”)

“Markets are where we buy and sell things.
Markets are where we exchange.
We exchange as we buy and we sell things.
Producers, consumers exchange.”
“Markets! Oh, Markets!
Oh, Markets are where we exchange, exchange.
Markets! Oh, Markets!
Producers, consumers exchange.”

I am not making this up. Just check out the “Economic Songbook” on the web site of The Indiana Council on Economic Education, one of CEE’s affiliates.

How insidious are a few not-too-catchy tunes? By themselves, they’d be as laughable as they are dreadful. But these silly songs prep students for ingesting the free market ideology they’re force fed in high school economics.

Here are a few gems.

Banks and other financial institutions channel funds from savers to borrowers and investors.

Right. Either tell me another fairy tale or sell me a bridge. (They are for sale now—your friendly too-big-to-fail banker will be happy to broker a deal.)

Government-enforced price ceilings [set below the equilibrium price] and government-enforced price floors [set above the equilibrium price] distort price signals and incentives to producers and consumers. The price ceilings cause persistent shortages, whereas the price floors cause persistent surpluses.

Government-enforcement. “Gasp.” Distorted price signals. “Hurry, get my smelling salts.” Persistent shortages. “OMG. Help!” Persistent surpluses. “That’s right you fool workers, you won’t find jobs until you accept lower wages.”

The pursuit of self-interest in competitive markets generally leads to choices and behavior that also promote the national level of economic well-being.

Thank you CEE for letting us know how much we owe the Captains of Finance. Hats off to Mssrs. Blankfein, Cassano, Mozilla, Fuld, Rubin, Paulson … .

People’s incomes, in part, reflect choices they have made about education, training, skill development, and careers. People with few marketable skills are more likely to be poor.

And this explains pay gaps between males and females, blacks and non-blacks, even among those with the same educational credentials and job experience?

While these elements of the National Standards for Economics Education are banal, the curriculum’s insistence that change is impossible is even more insidious.

Pro-bank ideology aligns perfectly with the K-12 economics curriculum nowhere more clearly than in the view that pretty much any attempt by policy makers to spur economic activity—by using government spending to increase employment—is basically fruitless.

In the short run, increasing federal spending and/or reducing taxes can promote more employment and output, but these policies also put upward pressure on the price level and interest rates.

In the long run, the interest rate effects of fiscal policies lead to changes in private investment spending by businesses and individuals that partially, if not entirely, offset the output and employment effects of fiscal policy. (emphasis added)

Decoding econo-speak: a capitalist market system left to itself will naturally produce full employment and price stability. “Yippee!”

If you took this stuff at face value, you’d have to conclude that the raison d’être of economics is demonstrating the irrelevance of policy. Let’s hear it for laissez faire, invisible hands, and rational men.

Seriously folks, there’s not a shred of evidence to support the view that government intervention crowds out private sector activity. Yet this claim is repeated ad infinitum in all the economics textbooks at every level of instruction. Why? Because this is the stuff of neoliberal economics. It’s the status quo’s best defense. There’s no room for dissent.

“Hold on,” you say. “The CEE is an outlier; the whole of economics education is not such a blatent ad campaign for capitalism.” Nope. With few exceptions—thank you Dollars & Sense—economics education is little more than free-market boosterism.

The dismal state of economics education is not inevitable, but it will persist so long as the economics profession keeps its collective head up its individualist arse.

Susan Feiner is Professor of Economics and Professor of Women and Gender Studies at the University of Southern Maine. Her research on economics education has appeared in the American Economics Review, the Journal of Economic Education, Gender & Society, and the Review of Black Political Economy. The National Science Foundation and the Ford Foundation provided generous support.

4 thoughts on “Teaching Economics, Big-Bank Style”

  1. “Banks and other financial institutions channel funds from savers to borrowers and investors.”

    Can you explain how this one is wrong? I don’t see fundamental flaw that is implied.

  2. Kris, if banks were merely middlemen in the flow of loanable funds, they wouldn’t be raking in gazillions of dollars. A simple “middleman” function can’t explain why bank/financial services profits are fully 40% of US corporate profits. As the struggle over financial consumer protection heats up, we are finding out that close to half of bank earnings come from fees on services, not interest on loans. SF

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